Keynes’ wisdom still stands; “Anything we can actually do we can afford.”

Knowing can be a curse on a person’s life. I’d traded in a pack of lies for a pack of truth, and I didn’t know which one was heavier. Which one took the most strength to carry around? It was a ridiculous question, though, because once you know the truth, you can’t ever go back and pick up your suitcase of lies. Heavier or not, the truth is yours now.

Sue Monk Kidd, The Secret Life of Bees

Red was with graffiti slogan "#Leave no one behind"
Image by Etienne Girardet on Unsplash

The infamous Joseph Goebbels is often quoted as saying, ‘‘Make the lie big, make it simple, keep saying it, and eventually they [people] will believe it.” He would be proud to know that his legacy lives on. Today the big, simple lie is the one that promotes the idea that the UK government is limited in what it spends to the tax it collects and is dependent on fickle markets to borrow to cover spending exceeding tax ‘revenue’, meaning the so-called deficit. It is the lie that government spending can be compared to a household budget or a business spreadsheet of assets and liabilities, profits and loss. That taxes, viewed erroneously as government income, fund spending.

To read the newspapers every day, or listen to media interviews with politicians, economists, and think tanks, there can be no doubt, as he also noted, that one might, ‘Think of the press as a great keyboard on which the government can play’. Today we can add those who purvey the same economic orthodoxy in academia and think tanks, both on the left and right, and right there you have the mechanism which maintains the status quo. It is the power of the media through the written and spoken word to shape the world. A power that currently does not hold politicians to account but colludes with them.

You can’t get away from it. It is like a record on repeat, essentially reciting ad nauseam the lie that money is a scarce, finite commodity which constrains government spending, as if, somehow, we’d never moved away from the fixed exchange rate, gold standard model which died in 1971, when Bretton Woods was abandoned.

Thatcher began the lie in earnest with her now infamous statement that ‘There is no such thing as public money, there is only taxpayers’ money’. For decades, politicians on all sides of the political spectrum have used that story to justify being fiscally responsible, regardless of the consequences. Instead of looking at the real economy, the government counts the pennies instead. Jacob Rees Mogg recently resurrected the same nonsense, adding that, ‘if we borrow money, it will have to be paid back by our children and our children’s children’. The classic misdirection touted by politicians and media alike, aimed at putting the fear of god into people and keeping them compliant, not to mention justifying doing absolutely nothing to improve people’s lives for today, or for the future. Never mind that the facts that government ‘borrowing’ is a fiction dressed up as truth, or that the only burden future generations will face is the failure of current governments to invest in their future.

The result, over the last decade and more of this mode of thinking, is a decaying public and social infrastructure. Where a supposed shortage of money justifies privatisation, explained away as an antidote to the alleged inefficiency of the public sector, but in reality, hides that public money is flowing freely into private profit. Where a welfare system is no longer fit for purpose, keeps people living on the margins and is shamelessly used to divide people into the lazy and hardworking. Where the vast increase in poverty and inequality leads to lowered living standards, rising private debt and shattered lives as people struggle to make ends meet. And where, ultimately, instead of a thriving society, we end up with exactly the opposite.

At the other end of the scale, obscene wealth flaunts itself, the few doing very nicely, thank you. This is no accident. It derives from a toxic market ideology, the claimed belief that the trickle-down effect will share the profits of capitalism which is, in fact, no more than the enslavement of the many to the dictates of the few. The train crash budget is an example of how this works and Jeremy Hunt gave the rich a nice pension bonus whilst increasing taxes for ordinary people and allocating no money to stop the terminal decline of our public sector infrastructure.

The public has been sucked into this hideous narrative by a media colluding with a rotten, self-serving political and corporate establishment, which ultimately serves to deny them the wherewithal to live decent lives. In the mists of time, we have forgotten that after the second world war, when public debt was at 270% of GDP, that the NHS, education, and the social security system were the product of political will, not a fixation on balanced accounting. That full employment was, equally, a political decision borne of economic sense. We understood that the government, through its policies and spending decisions, had at its fingertips the possibility to create an infrastructure that benefited people, and the economy in which they worked. And it did for the most part.

In the intervening years, starting in the mid-’70s, that understanding began to be eroded by successive governments gazing like rabbits into the headlights of neoliberalism. This economic ideology, supported by household budget thinking, determined the policies embraced by politicians of all stripes. We are all the poorer for it.

We have the two dominant political parties still obsessed with such thinking and trying to outdo one another in terms of how fiscally responsible they can be. And let’s not let what is left of the progressive left off the hook either, because they too, even with their hearts in the right place, tread the same path of financial constraint, asking the perennial question of how economic agendas are to be paid for. The notion of taxing the rich and corporations to pay for public services holds sway, and immediately erects a brick wall, because it puts financial affordability before the economic conditions of the day, and monetary reality.

In a recent interview with the political commentator, Robert Peston, the shadow Health Secretary, Wes Streeting (and not for the first time) encapsulated in a few words everything that is wrong with how the political parties on both sides pitch their agenda. Whilst discussing a pay rise for NHS junior doctors, we’ll do it as quickly as economic circumstances allow’, he said, even if that means delaying it until a second Parliamentary term?’ Peston asked. Not exactly an advert creating public confidence.

In the meantime, just like the Conservatives’ grand plan to grow the economy to restore the public finances and be able to afford public services, the suggestion is that we are beholden to big business (working in partnership with government of course) to get the economy moving again. Government as the rule taker, not the rule maker.

The only conclusion one can draw from this nonsense is that we have no alternative but to wait until the economy is in such a position as to be able to afford improvements to our public and social infrastructure, by collecting sufficient tax revenue to do so. Never mind that by that time there might not be a functioning public and social infrastructure to speak of, should we continue down this road. But then maybe that’s all part of the plan?

Repairing the damage caused by a decade and more of austerity and cuts to spending on public services, from education to health, social care, and local authority services, will be no mean feat for any government which has the actual political will to do so. Over that prospect, there is clearly a big question mark, whoever wins the next election and whatever their promises are.

And that should set the alarm bells ringing when we consider the huge challenges we face to build a global economy that is equitable and environmentally sustainable. On the basis of such thinking, we might have to wait until the water passes over our heads metaphorically or perhaps even literally speaking, which will be all too late. Crazy thinking when one considers that we have no idea what the future holds tomorrow, next week or even next year, and the unexpected can always put paid to plans, however carefully laid or accounted for.

Only a couple of weeks ago, climate scientists from the IPCC delivered their ‘final warning’, as they noted that rising greenhouse gas emissions continue to push the world to the edge of irrevocable damage. It made its opinion clear with one stark message; ‘act now, or it will be too late.’

In 2018, when GIMMS was launched, it began its MMT Lens with a call to action.

Almost five years on, we still do not seem to have even got beyond hot air, empty promises and rhetoric. The COP series has led largely nowhere. A 1000-page plan published by the government last week has been described as ‘half-baked [and] half-hearted’, staking its success amongst other things on carbon capture and storage tech which is still scarcely off the drawing board. As if nature will put itself on hold until we’ve worked it out. We need a plan to cut emissions now, not tomorrow. The government has abdicated its responsibility as the mechanism to drive the change we need.

Furthermore, the pandemic and now a war have largely pushed the subject out of the public eye, as government focuses on more economic growth of any sort, and giving drilling permission to oil and gas companies to make up for perceived economic losses caused by the pandemic and the current conflict. We should not forget either the vast sums of public money flowing into the military and the pockets of the arms industry, as if somehow action on climate change can be put off until later. The loss we will suffer, if we fail to address these challenges, will be a planet that can sustain human life. The enemy is before us and it’s not Russia or China, it is something much more existential.

There is no acknowledgement, predictably from any politician on any side that the government, as the monopoly currency issuer, doesn’t have to wait to address poverty or inequality or the existential crisis of climate change. If it has a strategy for investment and the real resources, it can spend what it needs to. It doesn’t need big business to help it out, it just needs to use its capacity as the legislator and the holder of the public purse to create the conditions for economic prosperity and environmental sustainability, instead of leaving it to the markets to deliver more greed and obscene wealth for the few. That one would choose the latter is a shameful comment on those that would do so.

While the planet goes to pot, closer to home the cracks continue to open up and we are led astray by ridiculous arguments about how or whether we can pay for things. Whether the NHS or the state pension is still affordable is debated regularly in the press.

In the same week as NHS pay negotiations concluded, Jeremy Hunt, according to the Guardian, then promised to find extra cash … from somewhere. Suggesting that The treasury has a contingency reserve – a rainy day fund – that Hunt can draw on to meet unforeseen spending needs’. That ‘piggy bank under the bed waiting to be broken open in the event of an emergency’ moment. Dear Mr Hunt (and the Guardian) do pull the other one, it has bells on it. Just more smoke and mirrors – the bean counting that poses as monetary reality. The only rainy days are, and will be, the ones caused by governments which fail to act in the interests of those who elect them to power, and the consequences of which we are already experiencing in the most destructive of ways.

As Warren Mosler explains in the video below, the government ‘neither “has”, nor “doesn’t have”, dollars [pounds] because it is the source of dollars [pounds], much like the scorekeeper in a game, neither “has” nor “doesn’t have” points because it is the source of points. It simply increases or decreases the account of whomever it transacts with.’ And it certainly does not have any capacity to save or put money aside for a rainy day.

Government will get the £4bn needed to pay for the pay settlement from the same place it always does. The Treasury will authorise the central bank to create funds out of thin air with a simple keystroke. The idea that the government has to find spare cash from somewhere, or that it will have to transfer another department’s unspent budget to pay for NHS pay rises, or that there is a rainy-day pot set aside for contingencies is just pure gibberish. In the words of Stephanie Kelton, government ‘makes the money, issues it, and decides whether or not to make more. If more money is needed, the government provides it.’ No taxpayers, borrowing or jiggling budgets.

 

On the one hand, we have a media dedicated to presenting a false narrative of how the government spends with no challenge at all, and yet, on the other, that same media conversely notes the horrendous social and economic consequences of government policy, as if somehow there were little connection between spending and the state of the economy. It might acknowledge the problem, but then always reduces the argument either to one of individual blame or to ask where the money will come from to find solutions. It’s like the post-war period has been swept under the carpet and forgotten, even though it brought many economic and social benefits.

It is a relentless cause to mislead. Whether it is the Telegraph commenting on the recently published State Pension Review and whether it should be scrapped because of a supposed ‘funding dilemma’, or articles discussing how we can save our crumbling health and social care system or pay for the vital local services which keep our communities healthy and functioning, the media keeps the narrative flying in its headlines. The ‘how you pay for it’ question is par for the course. On the subject of pensions, the idea that as the ratio of workers to pensioners changes government will be forced to delay retirement to ensure they can be paid, is yet another classic example of misdirection. As the currency issuer, government can always meet those payments. The issue is never about affordability, rather it is whether the real assets will be available for retirees to purchase. You can hear an in-depth discussion of this topic over at the MMT Podcast’s latest programme in conversation with Yeva Nersisyan.

 

We will never have the care system we need as long as we keep expecting businesses or government to provide it.’ This from a Guardian article which highlighted that we are subtly being pushed to accept a new approach to the provision of the most basic human needs, shifting the responsibility from the state into the community. David Cameron’s ‘Big Society’ writ large.

One can imagine the delight that ministers might feel, being able to wash their hands of state involvement in social care provision to solve the current crisis in care. A crisis which can be attributed solely to decades of privatisation of home and residential care services, driven by a belief that the private sector was more efficient, meaning in reality that it could cut its costs through, for example, driving wages down. In turn, again, in a vicious circle, further cuts to public spending then impacted on social care budgets putting additional pressures on wages and working conditions, thus creating an intolerable strain on the ability to deliver a good quality care service. Ultimately it has left private, profit-seeking companies with unpalatable options that serve no-one, least of all those that depend on them.

The fact that the consultancy firm PricewaterhouseCoopers is involved in this project for, ‘developing blueprints for care’, which would, according to the blurb, keep ‘profits in the community’, should be ringing alarm bells. We are being indoctrinated into believing that there is no alternative and that solutions must be found outside state provision. It sidelines the fact that the government not only has the power of the public purse, but again, to reiterate, also the capacity to appropriate the real resources for public provision through its tax and other policies.

We can have humane, person-centred care without profit motives of any sort, funded fully by a government that has a proper strategy for such provision. We should demand it instead of accepting more fragmentation and community solutions which might sound positive but may not be able to deliver a sound, quality framework that ensures everyone gets good care when they need it, and dignity at the end of life.

When we look at welfare provision as a whole, we cannot fail to notice its failings and the impact they have on those people who depend on state support. When pure statistics become the stories of real people being punished for circumstances beyond their control, from disability to chronic illness and terminal conditions. As Frances Ryan put it in a recent article, ‘In a civilised society, this is where the welfare state would step in – but in recent years, Britain has reduced its safety net to a set of gaping holes. Through a mixture of cuts, squeezes and Kafkaesque tests, it has refashioned a system created to help people in need into an instrument of punishment.’

While politicians witter on about costs and affordability, they ignore the real costs to people’s lives and society. The Treasury perversely counting the pennies rather than the human cost of their false household accounting model of the state finances, which is rooted in the toxic economic ideology which directs spending and policy decisions. And as if that weren’t enough, government has cynically divided people between workers and shirkers so, as in a magician’s sleight of hand, they focus their upset for their own troubles on the wrong target.

No one should be in a position to have to choose between heating or eating. As the inimitable Tony Benn once said, ‘If we can find the money to kill people, we can find the money to help people’. To emphasise the point again, with the government as the currency issuer, it is never a question of monetary scarcity. It is always a question of political will to create a fair and equitable distribution of real resources, not to mention show some human empathy. After a decade of cuts, and their consequences as we watched in horror the impact of the pandemic on our public services, our lived experience is that austerity harms and kills and is enabled by a political elite against the poorest and most vulnerable in society, for no reason other than to maintain the status quo that allows them to benefit from excessive wealth and personal aggrandizement.

It should be a mark of shame for Michael Gove who recently denied that government was to blame for the UK being poorer, even after 13 years of being in power. Instead, he sought to pass the buck onto the war in Ukraine and the pandemic. Nothing like a bit of misdirection to take the heat away from a government which is the sole author of the economic and social crisis we are in the midst of.

Decades of neoliberal ideology pursued by successive governments, and the austerity years imposed by the Conservatives from 2010 onwards have led us here. The crumbling of the fundamental social and economic structures which keep society and the economy functioning. Deliberate, not accidental, nor a failed experiment.

As Kenan Malik so succinctly put it in a recent article,The welfare state today barely functions as a welfare state, it responds to inequality but also fuels inequality. It has become framed by the appeal to rationalise resources and coerce the poor, rather than the desire to enable people to live more flourishing lives. From beginning to the end there is something rotten in the way we think of welfare.

These are the consequences of decades of household budget and market-driven thinking – underfunding of essential services, the corporate takeover of public services and the shifting of responsibility from the state to the individual. Poverty and inequality have become entrenched as a result.

While both parties prattle on about growing the economy, the spending policies and fiscal constraints they propose pull the rug from under the feet of those working people who are expected to deliver this miracle of growth, even if that word growth should be examined in the context of what is environmentally and sustainably feasible.

What sort of society do we want? One that continues to create vast inequity and relies on more exploitation of human labour and appropriation of real resources into ever fewer hands, or one where people can lead healthier, more comfortable lives with good, stable, well-paid jobs, which makes them better able to contribute to a sustainable economy and the good functioning of society, from cradle to grave.  While such stunted thinking continues to hold sway, there will be no possibility of being able to address the ongoing economic, societal, and environmental decay.

But, we don’t have to accept the notion that there is no alternative to more hardship, the jam tomorrow proposition. Up until now, the public has been duped by the lies and have thus accepted their condition as unavoidable. But things are changing. The contradictions are beginning to become apparent. Whilst we are told there is no money for public services, we note that wars can be paid for without end, banks can be bailed out in the blink of an eye, and money can be conjured up out of nowhere during pandemics or poured into the bank accounts of politicians’ friends jumping on the corporate welfare bandwagon.

As Aditya Chakrabortty wrote in an article last month, “Time to face facts: the UK is a rich country that has enough money to ensure children don’t freeze and their parents don’t starve. Let us work out what our people need, in housing and healthcare and education, and provide it by redistributing resources from those who hoard them. As the economist John Maynard Keynes said, in the depths of the second world war: “Anything we can actually do we can afford.” While Chakrabortty is probably referring to taxing the rich to create a more stable society, the reality is that Keynes meant that these things are possible assuming we have the real resources to deliver them, whether it’s addressing inequity, investing in public infrastructure, or tackling climate change. The choice lies with politicians and we the electorate should be holding them to account for their failings.

 


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Our long awaited book Modern Monetary Theory: Key Insights, Leading Thinkers was published at the beginning of 2023. To celebrate the occasion the GIMMS team is proud to present its book launch in london on 20th April 2023.

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